Regulations to prevent "the too big to fail" have been stripped from our representative government, slowly returning in the current administration - if ever. The SEC's woefully behind computer system and staffing is an example. Other examples have been the dearth of adequately paid investigators for fraud in Medicare - slowly being changed but with the whole idea of sorely needed healthcare reform attacked at every turn.

As long as Big Finance remains bigger than our "Big Government" it will stay inefficient and ineffective and any effort to make it work better will be touted as "socialism" communism". They must do this to maintain control.

Bravo! to the judge willing to call it like it is. Maybe "occupy" could start a fund for the trial against citi as the cost to "we the people" seems to be the issue". If the US government wins one - we all win. It is quite clear to the casual observer citi screwed its clients like so many other Bigs.

I would say it shows a toothless regulator that is almost if not already in bed with the banks. No wonder they keep doing the same thing over and again if there is no real barrier to them doing so. These people are then godsmacked that protesters want to crucify them and the institutions they represent. Talk about being out of touch with society and reality.

The opportunity for civil litigation or class action suit is not disposed of just because the SEC does not require an admission of guilt. Instead, a conviction merely cannot be used as evidence in a civil trial because it has yet to be obtained.

Additionally, it is clear that the costs of going to trial outweigh the benefits. The only question is whether the cost of not directly obtaining the "truth of the matter" as a result of SEC litigation is too costly to make a settlement as described in the article the analytically correct course of action.

It is noteworthy that the settlement reached between the SEC and Citi necessarily reflect the legal claims and defenses at issue. What many fail to understand is that even in a case such as this, there is no guarantee that the SEC would win at trial. Instead, both sides measure their expected risk and reach a settlement.

The settlement process established by legal precedent should remain in tact. Under stare decisis (doctrine that legal precedent is binding in US common law), this judge is acting outside of his capacity. Alternative avenues to release the truth (such as this article and media generally, civil litigation) should play the role in disseminating the information to the public in these cases.

The only effective litigation of the issues the SEC supposedly regulates was previously done by securities class action law firms, acting as privateers. They were successful enough that "class action reform" under the Bush II administration effectively eliminated their letters of marque. Now as privateers they were open to criticism. But they provided why privateers always provide, effective action on the cheap and even better it saves the government the cost of doing it. But as 2005 they are effectively gone. And since 2005 of course the SEC is nearly gone. This is from the most recent budget justification @ www.sec.gov/about/secfy12conbudgjust.pdf

"Until recent years, the SEC has faced significant challenges in maintaining a staffing level and budget sufficient to carry out its core mission. The SEC experienced three years of frozen or reduced budgets from FY 2005 to 2007 that forced a reduction of 10 percent of the agency’s staff. Similarly, the agency’s investments in new or enhanced IT systems underwent a decline of about 50 percent from FY 2005 to 2009.

SEC staffing levels are just now returning to the level of FY 2005, despite the fact that the size and complexity of the securities markets have undergone tremendous growth since then. During the past decade, trading volume has more than doubled, the number of investment advisers grew by 50 percent, and the funds they manage have increased to $38 trillion. A number of financial firms spend many times more each year on their technology budgets alone than the SEC spends on all of its operations."

It is clear that the SEC has been starved continually in order to reduce it's ability to enforce the securities laws of the United States. This charade of settlements without admission of guilt has always been merely a tax on malfeasance and corruption. $285 million dollars is a lot of money for having done everything within the letter of the law. But it is cheap to buy off a likely loss of 2 or 3 times that if the government is successful. And compared to having the board members & officers go to prison... it's trivial.

Oh, the settlement money? It goes not to the SEC but rather to the treasury of the United States, in short to the general fund. The SEC does not sue on the part of the victimized, it sues on the behalf of the United States. That's why the non admission is so important. With an admission of guilt the victims could get individually compensated via the civil courts.

Citibank is too big to fail, so it is too big to convict. Therefore all one can do is extract a fine small enough not to damage it. Otherwise, it is effectively exempt from laws against fraud.

So are all the other too big to fail banks. How can the government enforce against them, or allow successful lawsuits against them, if it cannot afford to have them fail?

So are the four remaining accounting firms, after the indictment of Arthur Anderson wiped it off the map. Were another of these firms to enable the same frauds today, the only choice would be a carefully calibrated fine that didn't do too much damage.

That's what the fine against Citigroup was. There is no law or legal precedent that these oligopolies are bound to respect.

The court is not the government. And the SEC is not the government. The SEC is made up of citizens who make a living in the financial world. The court is made up of people who have studied and practiced law.
The government is elected officials who want to appease the people that voted for them. If a big bank screws up, then many voters (and lobbyists) are unhappy and poorer. So the government asks the Federal Reserve to buy the bonds that the treasury prints. And then it bails out the banks with that money so the voters are happier.
If the bank fails, then bankers and investors and depositors are poorer, but not equally poorer. If the bank is bailed out then all those people are NOT equally well off. But jealous whining is not nearly as bad as desperate calls to arms.

Good point CCH08, but surely therefore the SEC should aid the true victims to a - for example - class action using all resources at their disposal rather than play cut and run? Worst case is that there is no incentive to clean up (plaintiff and defendant behaviour) and no quality check down the line to prevent persistent frauds becoming endemic.

The wonderful thing about Courts is that they have time, time to dig out the details. I'm with mymind, courageous judge; furthermore, when it is in a firms' interests to defend itself, it too could be seen to be encouraged to "assist", if only to limit the damages and answer the plaintiffs' case meaningfully.
All the best

At what point of wrong doing is a corporation up for capital punishment?
With the contempt of law (aka robo-signers), this case of fraud, and many other offenses the TBTF banks have committed; when do societies mechanisms get a chance to work on these guys? Without a conviction and the holy hell they unleash at corporations how does the corruption get cleaned up?

The SEC has very limited resources to prosecute, and a complex case can be enormously expensive and resources-consuming to actually litigate. How the SEC decides to use its limited resources to fulfill its mandate of policing the huge securities market should be a decision made by the SEC and, ultimately, the Congress, which decides on the SEC's annual budgets.

The US plea bargain tradition always had an odd smell to it.
Yes, it was cheaper, quicker, but did it bring justice to those
who were hurt in one way or another. This is after all the main purpos of our legal systems.

Good article. Excuse me, but how do the potential plaintiffs (Citi purportedly ripped off) benefit from the settlement the SEC screws out of Citi? Or does the sheriff beat up Dick Turpin and ride away with the stagecoach?
All the best...